Democratic U.S. Senate candidate Al Franken says he paid taxes on all income, but the money didn’t go to the right coffers.

Jim Gehrz, Star Tribune

Al Franken said the money he paid is an estimation of taxes and penalties owed in the various states. Once those amounts are recorded, he said he will be able to apply for a credit on taxes overpaid in New York and Minnesota.

Jim Gehrz, Star Tribune

Franken pays $70,000 back taxes, penalties

Article by: PATRICIA LOPEZ and KEVIN DUCHSCHERE

Star Tribune

April 30, 2008 - 8:32 AM

Democratic U.S. Senate candidate Al Franken, front-runner in the race to challenge Republican U.S. Sen. Norm Coleman, said on Tuesday that he has paid $70,000 in back taxes and penalties owed in 17 states, going back to 2003.

Franken, who has earned income across the country for celebrity appearances and speeches, blamed his accountant of 18 years for failing to pay the appropriate taxes owed in each state.

The accountant, Allen Chanzis of New York, "just made a basic kind of error that had a lot of ramifications," Franken said.

Franken said that he paid federal and state taxes on all of his income, but that the accountant had failed to properly distribute the tax payments.

The net result, Franken said, was that between 2003 and 2006, he overpaid taxes in New York and Minnesota while failing to pay in 17 other states where he earned income.

Franken said the $70,000 is his newly hired tax team's estimation of taxes and penalties owed in the various states. Once those tax returns have been processed, he said he will be able to apply for a credit on taxes overpaid in New York and Minnesota.

In total Franken said he under paid taxes by just over $4,000.

"Franni and I have paid state and federal taxes on every cent of our income," he said, referring to his wife. "Franni and I believe in paying state and federal taxes on all our income."

Franken said he would not release his income tax returns for those years. He said he has filed for an extension on his 2007 taxes.

Asked about the taxes before 2003, campaign manager Andy Barr said Franken was unable to reconstruct his tax situation prior to 2003 because those years' financial records weren't complete. Chanzis, Barr said, "had some stuff, but you have to have everything together and it just happens that [the accountants] were able to go back to 2003."

Chanzis did not return calls for comment.

A long-considered run

A best-selling author and political satirist, Franken began laying the foundation for a Senate run as early as 2006 and declared his candidacy in early February 2007. Even before then, Franken had hit the hustings for other DFL candidates in the state in 2005.

Almost immediately, Franken came under a barrage of attacks from Republicans eager to trip the man who made his living by skewering their most cherished public figures, from President Bush to talk-show host Rush Limbaugh.

It was a Republican blogger who unearthed what would become a series of disclosures about Franken's financial dealings that culminated Tuesday in Franken's admission on back taxes.

"I trusted this to a professional," Franken said of his accountant. Franken said he had hired someone to research his record -- typical for statewide candidates -- but that the researchers had not yet gotten to his financial records before the news broke.

While he was incorporated in three states -- New York, California and Minnesota -- Franken said that his company, Alan Franken Inc., was structured in such a way that it had no corporate income tax liability.

Instead, Franken said, he paid taxes through the individual income tax.

Chance for a challenge

Franken has already had to answer criticisms on other aspects of his long and colorful career as a sharp-tongued political satirist.

Republicans have built a catalog of the entertainer's harsh comments on political figures, running a series of Web ads that have attempted to make the case that Franken is ill-suited to the Senate. Since March, they have concentrated their efforts on Franken's financial dealings.

On Tuesday, Minnesota Republican Party Chairman Ron Carey said the latest revelations are indications of a troubling double standard. "Minnesotans who are struggling to pay their taxes on a timely basis and make ends meet should be offended," Carey said.

Jennifer Duffy, of the Cook Political Report in Washington, D.C., said that the "nervousness about Franken's candidacy had ebbed, but it's going to spike back up now."

The chances for a serious challenger are remote, she said, unless the candidate can provide funding and go straight to a September primary, bypassing the June endorsing convention. Attorney Mike Ciresi dropped out last month after it had become clear that he was behind in delegates who would endorse a candidate at the DFL state convention in June.

Ciresi on Tuesday demurred on whether he would re-enter the race. "I prefer to reserve my comments and judgment until the facts come out," Ciresi said. "At this point, I really can't predict what the future might bring. You take a look at events and make judgments and decisions."

DFL candidate Jack Nelson-Pallmeyer, a University of St. Thomas professor who continues to challenge Franken for party endorsement, would not comment on Franken's latest admission but has said he would release his income tax returns.

Coleman said that if other candidates would do so, he would release a summary of his income taxes.

Franken did not commit to releasing a summary, saying he would have to first examine whatever others released.

Under fire

Franken has been under fire since early March, with revelations that he had failed to pay workers' compensation and disability premiums for employees of his New York-based corporation, Alan Franken, Inc., between 2002 and 2005.

New York state officials had tried to collect the back premiums for four years, resorting to a collection agency and even filing a summary judgment against Franken in state Supreme Court last May for $25,000.

On Tuesday Franken said that he had left a forwarding address when he moved to Minnesota, but had never received any notices from the state. He has since paid the back premiums and penalties in New York.

Earlier this month, Franken was found to owe the state of California $4,740 for failing to file corporate tax returns between 2003 and 2007. He said on Tuesday he has cleared that amount as well.

Franken has had numerous engagements in California since 2003 and in his U.S. Senate Financial Disclosure Report, filed May 2007, he stated that he does business not only in California, but in New York, Wisconsin, Massachusetts, Delaware, Michigan, Kentucky and elsewhere.

Coleman, asked about Tuesday's developments, said: "I'm certainly troubled by these admissions. I would hope that Mr. Franken would continue to come forward and continue to be candid as to the nature of these problems.

"I serve on the Small Business Committee," Coleman said. "I represent thousands of small businessmen and -women in Minnesota. Those folks pay their taxes and meet their obligation -- that is the expectation and so certainly these admissions by Mr. Franken are troubling."

Franken said that he did not think his credibility would be damaged by recent admissions.

"I think Minnesotans are fair-minded and I think when they look at this... they'll say, 'Oh, I see, the Frankens paid state and federal taxes on all their income and they tried to comply," Franken said.